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Saturday, January 20, 2018

4 Reasons to Form an LLC or Incorporate Your Business

Are you operating your business under a fictitious name, your own
name or as a sole proprietorship or general partnership? Are you at
risk because your assets are not protected from legal issues? If you are
operating your business without the protection an LLC or corporate
offers, it's time to make it official.

Here are four very good reasons to incorporate or form an LLC as soon as possible.

1. You are sending a bad message to your customers

When you operate as a sole proprietorship or a general partnership,
you are sending the message that you are still inexperienced, testing
the waters or unsure if you are serious about your business. Maybe you
have been told that incorporating or forming an LLC is just another
expense and it won't save you anything on taxes. This is not the only
thing you should consider, however, as you also want to consider how you
are marketing your business and what you are telling your customers.

2. You can protect your assets

If you hold all of your assets in your name and you have not formed a
corporation or LLC, you are doing something very risky. What happens if
a customer sues you after they get hurt by a product? What if a vendor
comes after you for non-payment? All it takes is one lawsuit -- which
you will probably not see coming -- to ruin your personal credit and put
your belongings and home at risk. Even if you do your best to play by
the rules and treat everyone fairly, you cannot be fully covered while
operating as a sole proprietorship or partnership.

When your corporation or LLC borrows money, signs a lease, or buys anything on credit, you will not be personally liable.

3. There are important tax benefits

Operating as a sole proprietorship can cost you significantly in
self employment taxes, which tax your income at the highest possible tax
rate for your situation. The decision to form an LLC or incorporate can
turn otherwise non-deductible personal expenses into legitimate
business expenses that may be deducted. In many cases, the corporate tax
rate is much lower than the individual tax rate. A corporation or
limited liability company can often qualify for additional tax
deductions and benefits unavailable to individuals. This is because
incorporating creates a separate legal entity.

4. It will be easier to raise capital

When you want to raise money for your business, having a corporation
will make it easier to find the money you need. You can take on
investors by selling shares, or you can borrow from banks and lending
institutions. If a third party investors wants to invest in your
business, there must be an entity set up to accept the money. Most
venture capitalists prefer to work with corporations.

You have put
it off long enough. If you want your business to be taken seriously and
gain protection for yourself and your family, it's time to consult with
a corporation service company or an attorney to go over your options.